A data room can be an effective tool to show investors the value of your company and its potential. It is used for due diligence in M&A transactions, but can also be useful for fundraising, IPOs and other investor gatherings. However, the process of preparing a data room can he has a good point be a lengthy and often overwhelming task. How do you determine which documents to include, how should they be arranged and grouped, and how do you set permissions?

As a startup you should provide data that can support your narrative. This will differ based on the stage at which you are. For example companies in the early stages of their startup may prefer to focus on information about market trends, regulatory changes, and compelling “why now?” forces. Growth-stage companies on the other hand should concentrate on trends that relate to key metrics, like customer acquisition, revenue, and the like.

Avoid including too much information. Too much information can overwhelm investors, and may indicate that your team does not understand how to improve the performance for the company. Be sure that any metrics you provide are representative of all data and not just a handful (such as displaying only “bright spots”)

An annotation tool lets users to make their own comments and questions to any document in the virtual data room. This helps keep discussions focused and facilitates managing the Q&A process. Furthermore, access permissions for granularity which can be customized at the level of folders and documents is essential to reduce the possibility of sensitive information being shared with third parties. Also, search for a vendor that provides a range of reporting tools which track user activities, such as what documents are being viewed and when they are viewed.